SCOTUS: Hospital residents must pay taxes

Full-time medical residents should be considered employees and will continue to have to pay Social Security taxes, a Jan. 11 Supreme Court case ruled.

The case, Mayo Foundation v. United States, held that residents must continue to pay the Federal Insurance Contributions Act tax, which funds Social Security, complying with a 2005 decision by the Internal Revenue Service.

The rules were challenged in four federal appeals courts before reaching the Supreme Court, after the IRS issued new rules in 2005 that excluded students working as full-time employees from receiving tax exemptions.

The University has been paying its portion of the FICA taxes for medical residents since the IRS ruling, but if the Supreme Court reversed the ruling, GW could have requested reimbursement of the employer’s portion of the tax. Residents also could have requested reimbursement of their portion of the tax – which is up to 7.65 percent of each resident’s wages, Jennifer Lopez, director of GW’s Tax, Payroll and Benefits Administration Department, said.

“GW’s position is that residents should be considered students,” Lopez said, adding that there are about 350 residents at GW who earn between $50,000 to $65,000 yearly.

The FICA tax on the salary is between $3,825 and $4,972.50 annually.

Lopez said the ruling will not affect the duties, responsibilities or expectations the University sets for medical residents.

The Treasury Department concluded that residents “who work long hours, serve as highly skilled professionals, and typically share some or all of the terms of employment of career employees,” should be regarded as full-time employees, Chief Justice John Roberts wrote in the court’s opinion.

Ivy Baer, director and regulatory counsel of the Association of American Medical Colleges, said in an e-mail the AAMC is disappointed with the court’s decision.

“Even though residents may be employees under the tax code, they are still learners in every other sense as they make their way through the training that eventually will enable them to practice medicine independently,” Baer said.

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